On Wednesday Dell said it would buy networking-gear-maker Force10 Networks. The move is expected as Dell’s rivals in the server space have tied up their networking equipment buys in the past three years after Cisco launched its unified computing system that combined computing and networking in one box. Many had assumed Dell would pick up Brocade, but Force10 apparently made the cut. The value of the deal was not disclosed.
A UBS research note from Wednesday points out that the deal will likely put Dell in closer competition with HP and Cisco. From the note:
Today Dell announced the acquisition of networking company Force10. In the past, Dell resold/OEMed Ethernet Switches from BRCD/JNPR although Dell was not a 10% customer for either. It is likely over time, Dell will prefer Force10 products for Data Center applications. Cisco will also see increased competition from Dell as a result. Lower mgn [margin] hardware companies Dell and HP expanding networking efforts could create greater price competition than in the past.
Dell is moving upstream into networking even as the networking business is facing a shift akin to what happened in servers after the introduction of virtualization. On Tuesday Intel announced the acquisition of a networking chip company that is Intel’s means of capitalizing on that trend. So with Dell moving into this sector with Force10, its relentless focus on the bottom line might make it better suited should switch makers find themselves competing to sell what essentially becomes commoditized networking gear. From the Dell release:
“Today’s datacenter networks are too complex and require too much manual intervention. What worked in the past is no longer viable in the virtual era,” said Brad Anderson, senior vice president, Enterprise Solutions Group, Dell. “Dell’s approach of offering customers open, capable and affordable solutions aligns with Force10’s approach to offering customers new levels of flexibility, performance, scale and automation which is fundamental to changing the economics of datacenter networking.”
It looks like Dell is preparing for the coming era of open networking gear and plans to capitalize on that trend with Force10. For more, check out our virtualized networking panel from Structure 2011 in the video below: